In this day and age small businesses often have a difficult time getting loans through conventional avenues. However there are several alternatives that small businesses and their CEO’s should take into consideration when attempting to get a loan. These Small Business Loan Alternatives are as follows:
Small Business Loan Alternatives
Alternative Lending Institutions
For small businesses, banks are not the only institutions that offer loans. CEOs of small businesses should consider both theEnterprise Boards and Credit Unions when searching for a loan. Both of these institutions may lend to small businesses when traditional banks will not. Typically these institutions are a bit less strict with their requirements when compared to traditional banks. As such, small businesses that might not qualify for a traditional bank loan may have a greater chance of receiving a loan via micro finance Ireland or a credit union.
Micro loans are small loans that are given to businesses based on need and the nature of the business. Typically micro loans are short term and have little or no interest rates attached to them. Although micro-loans were first made popular in poverty stricken areas of the world, micro loans have also become ideal for small businesses in industrialized nations that want to get a small amount of cash quickly. The loans can be used however the CEO sees fit.
Asset Based Lending
Many small businesses are not able to obtain a loan in the traditional manner because they lack the typical collateral or credit score to do so. If this is the case, asset based lending is ideal. This type of lending is dependent upon a company’s receivables or invoices. These “assets” serve as an unconventional form of collateral. This type of lending of financing usually takes place in a business-to-business format. The assets serve as a form of proof that the small business can pay the loan back.
Cash advances allow businesses to get a determined sum of money from a lender. In many cases the advance come from a credit card with a preset limit. For many small business CEO’s cash advances serve as a way to allow a business to remain afloat.` Although cash advances are relatively easy to obtain, they are not always ideal because they usually come with a hefty interest rate that can make them difficult to pay back.
Choosing the Proper Loan Alternatives
When choosing the proper loan alternatives it’s important that small business CEO’s take all of the needs of the business into consideration. For instance, one of the first factors to consider is the loan amount and what the loan is going to be used to accomplish. Once this is taken into consideration the small business CEO can then choose which loan alternative offers the appropriate amount at the lowest interest rate possible. The small business must be careful not to choose a loan alternative that will create loan payments that are impossible to pay back. Once this is decided the CEO should choose the option he or she is most comfortable with.
The Future of Small Business Loans
Although economic improvements have occurred throughout the world over the past six months, there is still a great deal of trepidation as it pertains to the economy and the ability of small businesses to get needed loans. With this in mind, it is important that small business CEO’s carefully consider each of the aforementioned loan alternatives. Additionally, it is important the CEO’s explore unconventional avenues to ensure that they have the ability to raise capital if and when it is needed.